Tribunal Allows Late Appeal, Citing Substantial Justice; Orders Full Depreciation on Machinery and Vehicles.

The tribunal condoned the 104-day delay in filing the appeal, emphasizing substantial justice over technicalities. It allowed the assessee's appeal regarding disallowance of interest expenses under Section 36(1)(iii), citing a favorable precedent. The tribunal also directed the AO to allow full depreciation on machinery and vehicles, overturning previous disallowances. The appeal was partly allowed.

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Issues Involved:
1. Delay in filing the appeal.
2. Disallowance of interest expenses under section 36(1)(iii).
3. Disallowance of depreciation on machinery.
4. Disallowance of depreciation on vehicles.

Detailed Analysis:

1. Delay in Filing the Appeal:
The assessee's appeal was delayed by 104 days due to an inadvertent mistake by the accountant. The assessee filed an affidavit explaining the delay, and the Revenue did not counter this affidavit. The tribunal emphasized that the principle of advancing substantial justice is paramount when considering the condonation of delay. Referring to the Supreme Court's judgment in Collector, Land Acquisition v. Mst. Katiji and Ors. (167 ITR 471), the tribunal highlighted that substantial justice should prevail over technicalities. Consequently, the tribunal condoned the delay and proceeded to address the merits of the case.

2. Disallowance of Interest Expenses under Section 36(1)(iii):
The assessee had borrowed funds to acquire machinery, and the AO disallowed the interest expenses up to the date the asset was put to use, arguing it should be capitalized. The CIT(A) upheld this disallowance. The tribunal noted that a similar issue had been decided in the assessee's favor for the previous year, where it was held that the acquisition of the asset did not amount to the extension of the existing business. Therefore, the interest expenses were deductible. Following the precedent, the tribunal directed the AO to delete the addition, allowing the assessee's appeal on this ground.

3. Disallowance of Depreciation on Machinery:
The AO disallowed 50% of the depreciation on machinery, arguing it was used for less than 180 days as it was registered on 4th October 2011. The CIT(A) confirmed this disallowance. The tribunal calculated the number of days from 4th October 2011 to 31st March 2012, which totaled 180 days. Since the asset was used for 180 days, it fell outside the purview of the proviso to section 32, which restricts depreciation to 50% if used for less than 180 days. The tribunal directed the AO to allow full depreciation, thus allowing the assessee's appeal on this ground.

4. Disallowance of Depreciation on Vehicles:
The AO disallowed 50% of the depreciation on vehicles, arguing they were used for less than 180 days as they were registered on 12th October 2011. The CIT(A) upheld this disallowance. The tribunal noted that the vehicles were purchased on 27th September 2011, insured from that date, and ready for use. Citing the Gujarat High Court's judgment, the tribunal held that the vehicles were eligible for full depreciation as they were ready for use before the registration date. The tribunal directed the AO to allow full depreciation, thus allowing the assessee's appeal on this ground.

Conclusion:
The tribunal condoned the delay in filing the appeal and allowed the assessee's appeals on the grounds of disallowance of interest expenses and depreciation on machinery and vehicles. The appeal was partly allowed.

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